Economy Looms But the Love For Life Blossoms

Jack Prot

The emerging India’s share of the world life insurance market grew marginally during the last year to 1.97% from 1.68% a year ago. The premium on life insurance policies generated from India amounted to equivalent of $47.1 billion in the last year, up from $37.22 billion in 2006.However, this business in India slowed down considerably in 2007-08, the overall business grew by over 36% in the US dollar terms. This downturn partly because of the strengthening of the rupee vis-a-vis the US dollar. The significant growth includes renewal premium. India’s real growth in this sector is at 14.2% in 2007-08 and is more than two-and-half times the world average.

The key driver of growth in life insurance business of the Indian economy was the trend toward single premium business and pension and annuity products. The Indian insurance industry was shifting one from providing traditional life insurance to these new sectors because of ageing populations(more than 2% crossing 55 every year) and reduction in state social security benefits. Although Indian economy faced a severe credit crisis in 2007 which led to turbulence in the financial market insurance, sales of life insurance products were unaffected.

The rage of sales in the life insurance policies are due to a blend of factors. With the liberalisation of the Indian economy, there is no shortage of investment options for a person to choose from. Today’s investment chart include gold, property, fixed income instruments, mutual funds and of course, life insurance. Given the volume of choices, it becomes imperative to make the right choice when investing the hard-earned money. Life insurance has remained as a unique investment that helps the investor to meet his manifold needs – saving for life’s important goals, and protecting his assets and tax savings. Tax saving Insurance Policy is in vogue among the Indian youth whose real income has seen a spectacular growth due to the IT and retail boom.

From an investor’s point of view, an investment in the life insurance policy can play two roles – asset appreciation or asset protection. This policy is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation. The core benefit associated with the life insurance is that the financial interests of one’s family remain protected from circumstances such as loss of income due to severe illness or premature death of the policyholder. Simultaneously, insurance products also have a strong potential for wealth creation proposition. The insured therefore benefits on two counts and life insurance occupies a unique space in the landscape of investment.

Life insurance is the only investment option that offers case specific products for different stages of life. It thus ensures that the benefits offered to the customer reflect the needs of the customer at any particular stage of life, and hence ensures that the financial goals of that life stage are met without any hassle. Therefore, despite a macroeconomic environment characterised by marginally slower economic growth and rising inflation, life insurance continued to expand in 2007 with an significant increase of 5.4% to $2, 393 billion.

The latest innovation in the field of life insurance is the ULIPs. These policies have gained high acceptance due to attractive features they offer. These policies offer the Flexibility to choose sum assured, premium amount, change asset allocation by switching between funds and to change level of Premium /Sum Assured even after the plan has started. In case of ULIPs, the policy holder has the Option to withdraw money after few years (comfort required in case of exigency). These policies are of low minimum tenure and partial or systematic withdrawal is allowed to the policyholder.

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